DOJ moves to block Oracle's PeopleSoft takeover

The U.S. Dept. of Justice (DOJ) moved yesterday to block database and application software giant Oracle Corp.'s bid to buy application provider PeopleSoft Inc. The DOJ filed a civil antitrust lawsuit in U.S. District Court saying the proposed merger would "eliminate competition between two of the nation's leading providers of human resource and financial management enterprise software applications."

DOJ lawyers said an Oracle-PeopleSoft pairing would lead to higher prices, less innovation and fewer choices for businesses, government agencies and others. The attorneys general of Hawaii, Maryland, Massachusetts, Minnesota, New York, North Dakota and Texas joined the suit.

Oracle responded that it would vigorously challenge the Justice Department's move. "We believe that the government's case is without basis in fact or in law, and we look forward to proving this in court," said Jim Finn, Oracle spokesperson. At the same time, the company said it would withdraw a recent effort to elect a new slate of directors to the PeopleSoft board.

Oracle also extended a tender offer for all of the common stock of PeopleSoft to June 25. That offer was scheduled to expire on March 12.

PeopleSoft President and CEO Craig Conway was quick to comment. "Now that the antitrust day of reckoning has arrived and the Justice Department has announced its decision to sue to block the transaction, it is time for Oracle to abandon its efforts to acquire the company," Conway said in a statement.

The government's move to stop the takeover had been anticipated in some quarters. Analyst firm Gartner Group today said that a host of challenges now confront Oracle in its pursuit of PeopleSoft, noting that an antitrust ruling from the European Commission is pending as well.

In recent weeks, Oracle has increased its offer for PeopleSoft, which, when first announced in June of last year, was set at about $5.1 billion. The initial move came just days after PeopleSoft moved to purchase applications player J.D. Edwards for $1.7 billion. The J.D. Edwards-PeopleSoft merger has since been finalized.

About the Authors

Jack Vaughan is former Editor-at-Large at Application Development Trends magazine.